Social Security beneficiaries should not expect to see much in the way of an increase in their monthly checks. That’s despite receiving the highest COLA in seven years. Why aren’t more people upset by this?

The Department of Health and Human Services, which oversees Medicare, could have held its 2019 Part B premiums at the same level they are today but that might have been seen as a political move.

There is a Social Security rule that says benefits may not decline from one year to the next, including the impact of increases of Part B premiums. In the past, annual COLAs were normally large enough for people to pay the higher Part B premium and still see an increase in their Social Security benefits. However, since 2009 there have been three years with a zero COLA, and one year it was only 0.3%. In those years, the hold-harmless rule was invoked and many people did not have to pay those Part B premiums.

Last year’s 2% COLA permitted Medicare to catch up. Many people saw most, if not all, of their 2% increase used to pay higher Part B premiums. Those with higher benefits were paying full Part B premiums last year. This year, almost all of the COLA will go toward paying higher benefits. However, people with lower Social Security benefits who were paying below normal Part B premiums will now see a larger share of their COLA used to restore their Part B benefits to the level that most people pay.

What can be done to help this program, which helps the most vulnerable elderly citizens?

The hope would be to make benefits more progressive, helping workers with lower earnings at a higher rate than those with higher earnings. However, unless funds come from the higher earners, Social Security would become even more expensive than it is.

11/15/2018

The average life expectancy in America has increased from 68 years in 1950 to 79 years in 2013 and that has created a challenge. People now live longer and often need to fund assisted living, according to U.S. News & World Report in “How Should I Finance Assisted Living?”

The combination of increasing life expectancies and improvements to healthcare, means that more people are living longer after they stop working. This has led to a financial crisis for many Americans: how can they pay for the increased cost of healthcare and assistance needed, as they enjoy these additional years, and in some cases, decades.

It’s like a math problem. If you retire at age 65 and need to enter an assisted living facility 10 years later, how much money will you need to pay for the health care you’ll need by the time you reach 84? It’s impossible to calculate, because there are so many unknown factors.

Those factors are exactly what Americans need to consider because most facilities primarily rely on private payments and Medicare does not cover the cost of assisted living facilities. It only pays for rehabilitation in a nursing home for the first hundred days. After that, the only assistance available is Medicaid.

Medicaid coverage is supposed to kick in, only when a person has spent down all of their assets and is basically destitute.

One survey by a major financial company reports that the median monthly cost for an assisted living community is $3,750 or $45,000 a year. Long-term care by a home health aide can top $4,000 monthly or nearly $50,000 a year.

These kinds of numbers demonstrate the need to save and plan well for retirement and for the possibility of needing to pay for assisted living. However, boomers are not at all positioned well for either retirement or assisted living. By the time people start thinking about retirement, they are usually in their 50s or 60s.

No matter when you start, starting is better than not doing anything. When you meet with your estate planning attorney, discuss how your estate is structured, in terms of paying for long-term care. Does it make sense for you to purchase an insurance policy to protect your assets and should it be owned by you or by a trust? What kind of trust?

An estate planning attorney can advise you in answering those questions.

For starters, people need to do a complete financial analysis. This includes a hard look at current and potential future health care costs, which can decimate even the best retirement plan. That means planning for early retirement, long before Medicare is available. Resources may include a younger spouses’ COBRA, contributing to a Health Savings Account and any coverage gap that may occur between the time the person retires and when they reach age 65 and are eligible for Medicare.

Planning needs to start early so include the cost of college education for your children and planning for retirement. Saving rates slow down during retirement, so getting started on saving early is critical.

A financial plan can expose shortfalls. People may not want to consider themselves at risk. There is a strong tendency to procrastinate, thinking that there is enough time to catch up. The sooner you start planning, saving and facing reality, the better your chances of not filing for bankruptcy.

Another reason for the increasing rate of bankruptcies is that we are all living longer. That’s a great thing but it also means that health care costs are increasing, especially long-term care.

Medicare does not cover long-term care, including assisted living, memory care and the need for nursing home care. It does not cover routine eye care, dental care or hearing aids.

The national average costs for long-term care in the U.S. in 2016 were $225 a day or $6,844 per month for a semi-private room and $253 a day or $7,698 per month for a private room. All other health care costs have been increasing 6% annually, according to the Center for Medicare and Medicaid.

As a nation, we spent $3.2 trillion for health care in 2016. Those cost increases make planning a challenge for seniors and their families. Therefore, many unforeseen issues occur.

Another reason for the increase in bankruptcies among seniors is the “unwanted retirement.” Many older workers were downsized during the Great Recession and 60% of retirements were unplanned, according to a survey from TransAmerica. Downsized workers took on debt to survive and are now entering the next phase with expenses they did not count on having.

Many returned to the workforce, but at lower salaries. The Bureau of Labor Statistics says 36% of those 65 and older are still working—and 20% of those who are 70 and older are still working.

The average cost of just four years of long-term care for an elderly person is $140,000.

As the article points out, parents receive considerable government support to help offset the costs of raising children. The support comes in the form of tax credits and exemptions, in some cases. Lower income families receive support in other ways, such as food stamps and free school lunches.

While there is some support for taking care of the elderly because of Social Security and Medicare, there could be a lot more. Medicaid only pays for the long-term care of elderly people who do not have assets.

Families need to be aware of the high cost of caring for the elderly, so that they can plan accordingly.

While there are different measures of how many Americans have retirement accounts and how much money most people have in those accounts, it appears that overall people are not saving enough for their own retirements.

Only about 45% percent of Americans have an employee-sponsored retirement account and only about 14% own any stocks directly. Even among those people who have retirement accounts, it appears that most of them are not putting nearly as much into them as they need to.

This could make things more difficult for Republicans to reform Social Security and Medicare. Americans may be much more reliant on these programs in the future than politicians think.

A new study has found that the U.S. is going in the wrong direction. For the third straight year, the premature death rate has risen. This means that more years are being lost prematurely per 100,000 people.

While no one can be certain just why Americans are not living as long as they did previously, this new study strongly indicates that the opioid crisis takes considerable blame as well as the rapid rise of drug deaths in the U.S.

If the study is correct about the reason for more premature deaths, then it is likely that the government will need to do more to address opioids in the near future.

The government also needs to know its estimates regarding future Social Security, Medicare and Medicaid costs.

10/27/2017

Changes in society, including a growing population of elderly and funding questions has created challenges for the hospice industry, according to Politico in "Hospice in crisis."

The hospice care industry was developed, when a need arose for patients to be able to pass away peacefully and with as little pain as possible. A hospice facility is now where many people live out their last days, with support from hospice staff and their families.

One of the biggest issues for hospice is the availability of funding.

Medicare pays facilities a per patient per diem for in-facility care and slightly less for in-home services.

That funding faces a looming crisis, as the number of elderly people continues to rise. More people will need hospice treatment.

Another thing that makes funding an issue, is that more and more people are choosing to stay at home to pass away, instead of using facilities. There is often neither the money nor the availability of trained professionals to provide proper in-home care.

In some cases, that means many people end up in even more expensive emergency rooms and hospital beds.

It is not known how the hospice industry will adapt to these challenges and how Medicare will be funded to pay for the increased spending needs that are certain to come in the future.

The result of this trend is that wealthy Americans are receiving a disproportionate amount from the Social Security and Medicare system. However, when all government benefit programs are considered, the lowest income levels and the wealthiest receive about the same overall.

The problem is that the Social Security system needs to be fixed, to make sure it remains solvent.

One way to fix it is to increase the retirement age, but that will make the problem worse. Wealthier Americans will not be affected as much as many poorer Americans who will not live to see any benefits. This will effectively make their payments into the system, a tax on them for the benefit of the wealthy.

Another solution is through means-testing Social Security, but the program was designed without means-testing to make it more difficult to cut later on.

If the costs are not brought down dramatically, the future of both programs could be in jeopardy. Why? Americans are living longer and longer, which means that more people are or will be in need of Alzheimer's treatment.

Both programs are already extremely expensive and face financial difficulties in the future. With their present funding, they will not be able to afford a large increase in Alzheimer's diagnoses and treatments.

What does this mean?

Research into preventing and curing the disease is more important than ever. The development of new, less expensive treatment methods would also be helpful.

This is another of the many ways that an aging population could threaten the country's current institutions and practices, unless action is taken. Our programs were not designed with a substantial increase in longevity in mind.

Many recent studies report that the average American has saved far less than experts think they will need.

There are many reasons for this situation, but the reasons for not saving are not as important as what it means for future senior citizens.

The biggest issue is simply that people, on average, are living longer than ever before. That trend is expected to continue as medical science progresses. No one is certain just how long people will live after retirement in the future.

People who have planned to save for 20 years of retirement living might actually need to save for 30, 40 or even more years. This also creates problems for elderly safety nets.

Social Security, Medicare and Medicaid are already under financial stress because of the large number of Baby Boomers entering their retirement years. The longer people live, the more that those programs will need to pay out. Many people believe the programs will have to offer substantially fewer benefits in the future.